Applied Digital FY2027 Q1 Earnings: $342M Revenue, $36B Contracted — and a $184M Net Loss

Applied Digital quadrupled revenue to $341.9 million in its fiscal first quarter of 2027, up 322% from a year ago, as its AI data-center landlord business came fully online — and still lost $184.1 million. The quarter is the purest distillation of the company's bet yet: $36 billion of take-or-pay hyperscaler leases against $6.4 billion of debt, with the income statement caught in between. Revenue says the AI factory works. The bottom line says it is financed like a construction project, because it is one.

The Headline Numbers​

Every figure below comes from the Form 10-Q for the quarter ended August 31, 2026 and the earnings release. Dollar amounts are USD millions.

Revenue beat every expectation by a distance — the quarter printed $341.9 million against a pre-earnings consensus around $135 million — but the composition matters more than the beat. More than half of total revenue, $183.5 million, is tenant fit-out services: Applied Digital building out data halls to CoreWeave's specification and passing the cost through at a thin margin. It is real revenue under GAAP, and it is also the least recurring line on the page. Strip it out with the rest of ChronoScale, and the release's own adjusted revenue is $300.4 million — still nearly a fivefold increase, and a cleaner read on the landlord.

The loss widened tenfold even as adjusted EBITDA turned decisively positive at $64.4 million, up from $0.5 million. That split — GAAP net loss of $(184.1) million versus a core operation generating cash — is the entire quarter. Interest expense of $77.4 million, a $49.5 million derivatives loss tied mostly to a Babcock & Wilcox warrant, and $59.4 million of stock-based compensation sit between the two. None of those lines is the data-center business. All of them are the shareholders' bill.

Revenue Deep Dive: Three Businesses, One Landlord​

Applied Digital reports two segments plus a consolidated-everything "Other" that holds corporate costs and ChronoScale, its 96%-owned accelerated-compute subsidiary. The segment table is where the transformation shows.

HPC Hosting ($262.6M, +899%): This is the company now. The mix inside the number tells the story in three layers: $65.8 million of base rent, $183.5 million of tenant fit-out services, and $13.3 million of tenant recoveries. Base rent is the annuity — contracted, take-or-pay, non-cancellable — and it did not exist a year ago. Fit-out is the construction pass-through: $151.1 million of cost against $183.5 million of revenue, roughly an 18% gross margin, earned while buildings are being finished. It flatters the growth rate and will fade as campuses complete. Recoveries are dollar-for-dollar reimbursements. Management's ramp language was specific and checkable: the first 75 MW phase of Building 2 at Polaris Forge 1 reached Ready for Service on July 1, 2026, "bringing total live capacity at the campus to 175 MW," with a second 75 MW phase delivered October 1, subsequent to quarter end, lifting live load to 250 MW. The ledger confirms the demand is real and billed: receivables doubled in the quarter to $114.1 million, and deferred revenue jumped to $39.2 million from $4.7 million as tenants paid ahead.

Data Center Hosting ($37.8M, flat): The legacy crypto-mining hosting business, running its Jamestown and Ellendale facilities at full capacity, printed essentially the same revenue as last year — and more than doubled segment profit to $13.3 million on cheaper power. A flat, full, profitable line funding overhead while the HPC build consumes everything else. Boring has never looked so useful.

Other ($41.5M): Mostly ChronoScale, including $23.0 million of GPU hardware sales that began this quarter. The company excludes all of ChronoScale from its non-GAAP measures, which is both honest framing and a tell: the cloud-services business it once tried to sell, then folded back, then contributed into a Macquarie joint venture, is still not the story management wants judged on.

On the demand themes, the release is long on backlog and short on adjectives — which is stronger. There is no "demand exceeds supply" sentence; instead there is $36 billion of contracted base-term revenue, $86 billion if renewals exercise, across 1.41 GW of leased critical IT load. "Management expects additional hyperscalers to enter the Dakotas over time," the release says, and the company signed its first step outside the US: "up to approximately 1 GW of potential power capacity in Finland." That is market expansion as a signed agreement, not a forecast.

The Margin Story​

Gross margin fell twelve points year over year even as revenue quadrupled, and the mechanism is entirely mix. A year ago the revenue base was mostly hosting services at reasonable margins. Today it is dominated by fit-out pass-through at roughly 18% and a rental stream carrying $22.4 million of fresh depreciation on buildings that just went live. The rental gross margin itself — $79.1 million of revenue against $43.9 million of cost — is a healthy 44.6%, and the release's Net Operating Income of $58.8 million on $65.8 million of base rent is an 89% margin that looks like the REIT this company wants to become. But fit-out dilutes everything it touches, and it is more than half of revenue.

Operating margin improved dramatically versus last year's full-year −38.7% and sits at −18.2%, because segment profits are now real: $33.4 million from HPC and $13.3 million from crypto hosting, against $109.1 million of unallocated corporate and ChronoScale costs. The drag is headcount and paper: SG&A rose 289% to $114.7 million, of which $51.7 million is the year-over-year increase in stock-based compensation alone. Net margin's collapse to −53.8% is all below the operating line — interest, derivatives, the B&W investment — plus $16.1 million of discontinued operations from the Ekso business ChronoScale is shedding.

One conspicuous absence: pricing. The release contains no selling-price language of any kind, and that is structural, not an omission. Fifteen-year take-or-pay leases do not reprice; the price was the negotiation two years ago. What management talks about instead is scarcity on the supply side: "Power remains the gating factor for AI infrastructure, and the Dakotas are among the few regions where meaningful new capacity can be added at scale." With "coastal and metro markets increasingly constrained," in CEO Wes Cummins's words, "we believe the scarcity value of established, powered, and community-supported campuses increases." Price versus volume is the wrong frame here. The frame is contracted versus speculative — and $36 billion is contracted.

The One Big Question: When Does $36 Billion Become Cash?​

Applied Digital ended the quarter with $3.7 billion in cash and restricted cash against $6.4 billion of debt, and spent $2.07 billion on property and equipment in ninety days. The backlog is not the question; the bridge from backlog to cash is. This quarter built the first span: operating cash flow turned positive at $63.9 million, versus $(81.5) million a year ago. But interest paid was $242.9 million — more than triple interest expense, as construction-period financing costs consumed cash — and the company borrowed another $1.65 billion, including $1.59 billion of 7.000% senior secured notes due 2031 to fund the third Polaris Forge 1 building and repay a $300 million bridge.

The GAAP-to-non-GAAP bridge below, taken from the release's own reconciliation, shows what the core landlord earned once financing, paper compensation, deal costs and ChronoScale are removed:

The honest bull read: the operating landlord is roughly breakeven on $300 million of quarterly adjusted revenue, a year ahead of what the skeptics modeled, with 250 MW live and 300 MW targeted by year end. The honest bear read: every add-back is a real cost of being this company — the SBC recurs, the B&W warrant was a choice, the ChronoScale venture consumes attention — and adjusted net loss still rounds to a loss. Both can be true. What cannot be argued is the direction: adjusted EBITDA went from $0.5 million to $64.4 million in four quarters. Watch operating cash flow next quarter, not revenue. If it stays positive while capex peaks, the bridge holds.

What Wall Street Thinks​

The Street walked into earnings split almost comically wide. Rothschild & Co Redburn analyst Alex Haissl initiated coverage with a Neutral rating and a $22 price target, flagging execution, power, and pipeline-conversion risks; Jones Trading analyst Kevin Dede separately initiated with a Buy and a $70 target, citing the shift toward AI data centers and investment-grade customers, with the stock near $25 (StockStory). After the print, Wells Fargo raised its target to $55 from $50 and kept an Overweight rating, pointing to coming debt raises against new leases and further capacity expansion as the next catalysts (Stocktwits). A $22-to-$70 range is not disagreement about the quarter. It is disagreement about whether the backlog converts.

Tracking an $11.7 Billion Balance Sheet in Plain Text​

Double-entry bookkeeping forces every dollar to reconcile, which makes it an unforgiving way to read a company that loses money while building: nothing hides. Our open Applied Digital ledger reconstructs six fiscal periods line by line from the company's own 10-K and 10-Q filings — modeled the way we model every company, per how we model every company. Here is the quarter just reported, exactly as the ledger records it (income negative, expenses positive, summing to zero):

; FY2027Q1 Income Statement — quarter ended August 31, 2026
; Check: −341.875 + 289.571 + 114.683 + 77.383 − 35.821 + 49.511 + 11.352 + 1.311 + 1.886 + 16.054 − 184.055 = 0 ✓
2026-08-31 * "Applied Digital Corporation" "FY2027Q1 Income Statement"
  Income:Revenue                       -341.875 MUSD
  Expenses:CostOfRevenue                289.571 MUSD
  Expenses:SellingGeneralAdministrative 114.683 MUSD
  Expenses:OtherNet                      77.383 MUSD
  Expenses:OtherNet                     -35.821 MUSD
  Expenses:OtherNet                      49.511 MUSD
  Expenses:OtherNet                      11.352 MUSD
  Expenses:OtherNet                       1.311 MUSD
  Expenses:IncomeTax                      1.886 MUSD
  Expenses:DiscontinuedOperations        16.054 MUSD
  Equity:Adjustments                   -184.055 MUSD

The one balance-sheet number that tells the narrative is property and equipment: $64.3 million in FY2022, $6.33 billion today — a hundredfold expansion in four years. That line is the AI factory, poured concrete and energized halls, and every dollar of the $6.4 billion debt stack exists to fund it. Current debt of $112.6 million against $3.26 billion of balance-sheet cash and restricted cash says liquidity is not this year's problem. Refinancing $6.3 billion of long-term debt against leases that run fifteen years is next decade's.

The Multi-Year Arc​

Dollar amounts are USD millions. FY2023–FY2025 follow later filings' re-presented comparative columns; net loss is consolidated, including noncontrolling interests.

Five years ago this was Applied Blockchain, a crypto-hosting startup with $8.5 million of revenue and a $23.5 million loss. Then came the pivot: hosting revenue compounded 7x in two years, the cloud-services detour was created, classified held-for-sale, restored, and finally contributed into the Macquarie-backed ChronoScale venture (the $2.0 billion redeemable noncontrolling interest now sitting in mezzanine equity), and the HPC landlord business went from zero to $385.3 million of annual revenue in a single year. FY2026 is the hinge: the first HPC building went live, rental revenue appeared, and the net loss shrank even as the build tripled.

The arc says a company can lose money six periods in a row and still be working — if the losses buy contracted assets. Cumulative net losses since FY2022 total roughly $818 million. The contracted backlog is $36 billion. That ratio is either the best risk-reward in digital infrastructure or a monument to counting chickens, and the ledger cannot tell you which. It can only show you, to the thousand dollars, what has actually been spent and what it bought.

The Verdict: Bull vs. Bear​

Bull Case

• $36 billion of contracted base-term revenue ($86 billion with renewals) over ~15-year take-or-pay, non-cancellable leases with CoreWeave and investment-grade hyperscalers — roughly 60x FY2026 revenue in backlog.
• The HPC segment is already profitable: $33.4 million of segment profit on $262.6 million of revenue, with rental Net Operating Income at an 89% margin.
• Operating cash flow turned positive ($63.9 million) while live capacity grows from 250 MW toward 300 MW by end of calendar 2026 — each energized hall converts backlog to rent.
• $3.7 billion of cash and restricted cash plus proven debt-market access ($1.59 billion of 7% notes due 2031) funds the build without near-term equity dilution pressure.
• The legacy crypto business runs full at a $13.3 million quarterly profit, covering a tenth of corporate overhead for free.

Bear Case

• The GAAP loss is accelerating, not shrinking: $(184.1) million this quarter alone, $(0.76) per share from continuing operations, with interest at $77.4 million a quarter and rising.
• $6.4 billion of debt against a business that has never posted a GAAP profit; one HPC customer was 59% of FY2026 revenue, and construction delays can give tenants termination rights.
• Fit-out pass-through ($183.5 million at ~18% margin) flatters the 322% growth headline and disappears when buildings finish — the "real" revenue run-rate is far lower.
• Common shareholders stand last in line: $51.5 million of this quarter's loss went to noncontrolling interests, $2.0 billion of redeemable NCI and $181.3 million of preferred stock rank ahead of them, and share count rose 14% year over year.
• Non-core bets keep billing shareholders: a $56.1 million quarterly swing on a B&W warrant, an $11.4 million B&W stock loss, and a 1 GW Finland option that adds scope before the US pipeline is proven.

Our Take: Buy the backlog, watch the cash. Applied Digital has assembled the scarcest inputs in AI infrastructure — powered land, hyperscaler contracts, and a construction machine delivering 75 MW phases on schedule — and this quarter proved the flywheel turns: rent started, operating cash went positive, the landlord economics show through at 89% NOI margins. But shareholders are financing a $6.4 billion bridge with equity that dilutes 14% a year and paper losses that compound. If operating cash flow stays positive through the capex peak, the $22 bears will cover at multiples of today's price. If a campus slips and a tenant walks, the leverage works in reverse. The ledger will show it first — line by line, to the thousand.